Economy 'Unlikely' to Enter a Recession This Year: NRF
Despite functioning at "a slower pace," the economy “still does not appear to be in a recession and remains unlikely to enter one this year,” said National Retail Federation Chief Economist Jack Kleinhenz Tuesday. The underlying strength of the economy…
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is “strong enough to deal with inflation and keep a recession at bay -- or short-lived even if we are wrong," Kleinhenz said. Gross domestic product declined 1.6% year over year in Q1 and 0.9% in Q2. Though two consecutive quarters of decline is a common informal indicator of a recession, “the official declaration is up to the National Bureau of Economic Research, which defines a recession as a significant decline spread across the economy,” said the economist: “The bureau has yet to rule on whether the current downturn meets that definition.” Private final sales to domestic purchasers remained in positive territory for the first half of the year, though flat in Q2, and employment, retail sales, income and industrial production had slower growth, “but none have contracted,” he said. A significant downturn in employment could signal a recession, Kleinhenz said; the June unemployment rate was 3.6%, just above the 50-year pre-COVID-19 pandemic low of 3.5% in January 2020. Economic indicators remain strong, but “it is now clear that the world has changed” since the beginning of the year,” Kleinhenz said, citing the persistence of COVID-19, continuing supply chain challenges, the ongoing war in Ukraine and other issues driving inflation. NRF “remains constructive in our outlook,” holding to a 6%-8% year-on-year retail sales growth projection. “The key concern remains inflation and the Fed’s policy moves to contain it,” he said.